Introduction to Business MarketingIntroduction to Business Marketing

Part 1

What is Business Marketing?

Products or services to other companies, government bodies, institutions, and other organizations

Also products and services that facilitate their operations

Purchases in industrialized countries account for more than half of the economic activity

Makes business marketing extremely important

Key Differences

Demand for industrial products driven by primary demand for consumer goods (derived demand)

Nature of buyer-seller relationships (more personal) Shorter distribution channels (many direct) Emphasis on personal selling Greater web integration (communication backbone) More customization More complex buying process Smaller customer bases

Business Marketing vs. Consumer Marketing

Buyer-Seller RelationshipsConsumer markets tend to have less personal relationships

between buyers and sellersBuyer relationships focus on Lifetime Value of the customer

Emphasis on Personal Selling Greater Web Integration

Other Key Differences

Demand for industrial products driven by primary demand for consumer goods (derived demand)

Nature of buyer-seller relationships (more personal) Shorter distribution channels (many direct) More customization More complex buying process Smaller customer bases

Business Customers

Users Original Equipment Manufacturers (OEMs) Industrial Distributors Government Institutions

Can you provide examples of each?

Business Markets

Original Equipment Manufacturers (OEM)—When a company purchases a product or service to be included in its own final product

General Motors, Bosch, IBM, Thyssen-Krupp Elevator

UsersThe final consumer Business can also be users

Classifying Goods for the Business Market

Entering Goods

-Raw Materials

- Manufactured Materials

- Component Parts

Foundation Products

- Accessory Equipment

-Capital Equipment or installations

Facilitating or

MRO Items

- Facilitating Supplies

- Business Services

Can you provide examples of each?

Demand

Business marketers must recognize derived demand:

Derived demand is the theory that demand for products and services is derived from the demand for their customers’ products and services

– For example, the demand for wood floor treatment from Bill’s Floors and More is derived from the demand for new homes, which puts down hardwood floors

Derived demand can cause demand to swing wildly, called volatility.

Demand (cont’d)

Demand elasticity—the percentage change in sales relative to the percentage change in price

As price goes up, consumers will look for alternatives, and sales will go down.

Inelastic demand—sales is not greatly affected by price

Myths about Marketing

More sales equals more profits Any customer is a good customer Build a better mousetrap and the world will buy it Macro markets are more profitable than niche

markets

Marketing Management & Planning

Marketing Management encompasses all the decisions involved in designing and executing marketing plans to implement the marketing concept.

What is the marketing concept?

Marketing Management & Planning

Environmental Analysis Competition - Customers Channels - Controls Company

Establish Objectives Strategy Tactics and Programs

Product - Price Promotion - Place

Implement, Control & EvaluateFeedback loops throughout the process

Think About It

How would marketing telephone services to businesses (for example to University of Toledo) be similar and different than marketing them to consumers?

The Character of Business The Character of Business MarketingMarketing

Chapter 2

Relationship MarketingCenters On:

Establishing, Developing and Maintaining successful exchanges with

customers.

What is Relationship Marketing?

Longer time horizon High switching costs Large investment (procedures & assets) Focus on technology or vendor as opposed to

product or person Higher importance: strategic, operational &

personal Collaborative exchange

Types of Relationships

One time market transaction market exchange with no expectation of future transactions with each

other Functional relationships

series of one time market exchanges linked together over time Relational partners

long term business relationship in which a buyer and seller have a close/trusting interpersonal relationship

Strategic partnerships long term business relationships in which partners make significant

investments to improve the profitability of both parties in the relationship

Type of Relationship Exercise

Think about a specific relationship that you have with a professor, a friend, a cousin, and an older relative who is not a parent.

For each relationship is it functional, relational or strategic?

How did this relationship get to be this quality?

Relationships

Transactional relationships (spot exchange) = one time exchange i.e.: a freight service offering standard boxcars to any shipper

Customer Relationship Management (CRM) Systems that focus on collecting and storing data to evaluate

customers and performance Makes sales reps’ jobs easier! Typically in software

http://www.netsuite.com/portal/home.shtml http://www.act.com/

Phases of Relationship Development

Awareness

The buyer and seller consider the other as an exchange party

No real interaction

Exploration

The interaction between buyers and sellers occurs Probing and testing

Initial purchases may take place at this stage This is where the bargaining and communication

take place

Expansion

During this phase, one party has made a request to alter some aspect Customization occurs Expectations and norms

are developed

The buyer usually becomes committed to this particular seller

Commitment

Contracts, agreements, or orders are signed The two organizations become business partners

and resolve any conflicts that may occur

Dissolution

Termination of the advanced relationship

Safeguarding Relationships

There are many ways to keep relationships healthy, safe, and profitable Supplier verification—efforts to obtain evidence of supplier

capabilities and commitment Dependence balancing—having relationships with other

exchange partners, (just in case…) Relational contracts—contracts that define continuous planning,

adjusting and resolving conflicts Vertical integration—bringing a function or technlology into the

firmi.e. buying out a supplier